- Buy commands now take up 64% of the market
- Bullish market sentiment returned to its Monday's level of 52%
- 15% of the poll participants expect the British Pound to cost either between 1.58 and 1.60 or between 1.60 and 1.62 dollars after a three-month period
- Immediate resistance lies in face of the weekly R1 at 1.5616
- The nearest support rests around 1.5607, represented by the 55-day SMA
- Upcoming events today: US Retail Sales and Core Retail Sales, US Jobless Claims, US Import Prices, US Natural Gas Storage
Poor UK Average Earnings Index caused the Sterling to decline against most major peers yesterday. The most gradual loss was detected against the Swiss Franc, 1.10%, following with a 0.84% decline against the Euro, 0.77% versus the Loonie, 0.74% versus the Aussie and 0.71% versus the Kiwi. Nevertheless, the British Pound managed to appreciate 0.17% against the US Dollar.
In June, less people in the Europe's third largest economy claimed unemployment benefits; therefore, signalling that the British job market has not completely cooled off. The number of applicants for jobless benefits decreased by 4,900 in June, compared to a revised figure of an increase of 200 in May. Moreover, the June figure was surprisingly better than the increase of 1,000, expected by economists. The UK unemployment rate, however, remained unchanged at 5.6%, which is by 0.7% lower than in the same period a year before. Meanwhile, the amount of British looking for work rose 25,000 to 1.85 million.
In the meantime, wages in the UK rose steadily on an annual basis, albeit missing economists' forecasts. Pay with bonuses grew at 2.4% in June, compared to 3.2% jump in the preceding month. The slowdown in growth was mainly attributed to the 3.3% decline in bonuses in the reported period. Despite that, the basic pay growth came in line with the expectations of 2.8%, and slightly higher than the 2.7% jump the month before. In order for the Bank of England to move towards hiking its benchmark interest rates, great attention will be paid to the labour-market indicators.
Paul Bednarczyk, head of research at 4CAST, is optimistic with respect to the world's largest economy over the coming months, saying that "we should be seeing some better US numbers coming through," which will lead the Cable to 1.54. Meanwhile, the analyst considers that "over the next three months Sterling will perform well on a trade-weighted basis," but GBP/USD is still likely to decline to 1.4850. In the longer-term perspective, Bednarczyk is also bearish, setting his 12-month forecast at 1.42, which will be a story of Dollar strength rather than Sterling weakness.
US Retail Sales
Thursday is going to be a quiet day in terms of UK fundamental data, which leaves us with the US ones to influence the Cable. The most important event is the US Retail Sales, as it indicates the change in total value of sales at the retail level. The forecast stands at 0.5%, up from -0.3%, which is a rather serious rebound. However, according to historical data, the figures might disappoint today and show less-than-expected growth. The Retail Sales data also gives a broad look at the consumer spending data, which accounts for the majority of overall economic activity. As a result, the Retail Sales data could have a serious impact on the Fed's rate hike decision in September; volatility is expected.
Ross Walker, economist at Royal Bank of Scotland Group, suspects that GBP/USD may descend to 1.50 by around the middle of 2015, or even down to 1.40 by the end of the year. Ross mentioned that "the main driver in many ways, as well as the main support in recent times, have been the expectations that the Bank of England will raise interest rates at some point next year, probably the beginning 2016."
GBP/USD aims for six-week high
The GBP/USD currency pair surprised with its performance on Wednesday, as it rebounded after reaching a daily low of 1.5534. However, the immediate resistance cluster around 1.5510 managed to prevent the rally. On Thursday, the Cable is expected to surge again, as it is now supported by the 55-day SMA and the 1.56 psychological level. Consequently, last week's losses should be completely erased and a fresh six-week high could potentially be reached.
Daily chart
Once the GBP/USD approached the resistance trend-line, it did cause the pair to bounce back. However, the 200-hour SMA caused a stronger rebound, which resulted in the Cable breaking the trend-line and thus reaching a new weekly high. The Sterling remains strong above the 1.56 level and is expected to keep trading above that area today.
Hourly chart
Bulls barely prevailing over bears
Bullish market sentiment returned to its Monday's level of 52%. At the same time, the number of orders to buy the Sterling added ten percentage points. The commands now take up 64% of the market.
Other market participants now have a different outlooks towards the GBP/USD. The SAXO Group traders' sentiment worsened today, with 57% of all positions being short. At the same time, OANDA's market sentiment slightly improved, with 53% of their traders holding short positions, compared to 54% previously.
Spreads (avg, pip) / Trading volume / Volatility
15% of the poll participants expect the British Pound to cost either between 1.58 and 1.60 or between 1.60 and 1.62 dollars after a three-month period
According to the survey conducted between July 13 and August 13, 15% of traders assume the GBP/USD currency pair will cost either between 1.58 and 1.60 or between 1.60 and 1.62 dollars within three months. However, the second place shifted to the 1.52-1.54 price interval, selected by only 11% of the voters. The mean forecast for November 13, on the other hand, is 1.5721.
This week the sentiment changed a little, as the bullish mood still persists. The average forecast for the end of the current week went down, namely to 1.559 mark.
Although the sentiment remains bullish, the gap is now not that wide. Williamb, one of the Dukascopy poll participants, said that the Bank of England seems to be more aggressive than the Fed in terms of their interest rate decision. That was the main reason why he has a bullish perspective towards the GPB/USD. However, Nacerdz, another member of the Dukascopy community, expects the US Dollar to outperform the Pound by the end of the week. "My vision is bearish based on the technical analysis tools", he mentioned.